Business group asks Treasury to value environmental capital

It is called ‘‘natural capital’’ in economic jargon. But what it really means is how much the environment helps our economy.

A group of progressive businesses are hoping to reframe political debate by focusing on the ways the health of Victoria’s air, water and biodiversity is an important asset thatdirectly affects business and industry.

To that end the group – headed by bankmecu, VicSuper and Pacific Hydro – will launch on Thursday what they say is the first real attempt to calculate the value of this natural capital to Victoria’s economy, and what it costs when environmental assets are not well-maintained.

The analysis, carried out by consultancy The Nous Group, finds billions of dollars – $16 to 36 billion to be exact – of economic benefit comes from better protecting and strengthening the environment. And they say 61,000 to 225,000 extra jobs could be created by 2028.

If it goes the other way, and the state’s most important industries suffer from diminishing returns as a result of environmental problems such as rising extreme weather, poor soil quality or reduced water availability, then the economy takes a longer-term hit.

Nous puts the loss at $16 to $78 billion and 4000 to 584,000 jobs off projected economic growth to 2028, depending on how much damage continues.

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These results have to be taken with a grain of salt. The report concedes the findings are only indicative and not prepared with a general equilibrium model normally used for such exercises.

Bankmecu general manager for development, Rowan Dowland, says the work is not supposed to be definitive, rather a conversation starter. But he says business has not done enough to promote the economic benefits of a strong environment.

‘‘We haven’t had the economic conversation about about declining natural capital,’’ Mr Dowland said. ‘‘It is not about the economy or the environment in isolation. Clobbering the environment will clobber the economy.’’

The group’s findings suggest that when the economy is weak, a healthy environment buffers the state from the worst impacts, and when the economy is soaring, protected natural capital ensures the full benefits are reaped.

The results were formed by developing four scenarios – ranging from a complete economic reordering to be more sustainable to a significant collapse – through a series of workshops with experts and business.

Nous then did an analysis of how these scenarios would flow onto the eight major industries in Victoria such as agriculture and financial serves. For example if rainfall declines as a result of climate change, they sought to calculate what fall in output might occur in irrigation dependant farming.

As part of their efforts, the companies have now formed a body called the Future Economy Group to push their cause. Other members include tourism operators Intrepid, Environment Victoria and Australian Ethical Investment.

The group is calling on the State Government to take the baton and provide more environmental–economic data.

One recommendation is that detailed economic modelling should be carried out by State Treasury on the relationship between the economy and the environment with disclosure of environmental costs through the budget papers each year. The group also want a plan that would drive economic prosperity through reduced greenhouse gas emissions and protection of other natural capital.